I was talking with a friend at the beginning of the week, I asked him about his thoughts on the collapse of the Silicon Valley Bank and the crisis over at Credit Suisse and whether he thought this could be the start of another banking crisis. I was surprised by his reply that he knew nothing about it. As with much of the public in the UK this week, he had been following the latest news on Gary Lineker’s tweets.
Is the media forcing this rubbish onto us, or does the public generally want to engage in this mind-numbing useless news feed and forget about the real issues that affect us and our economy? Have we had enough bad news concerning the macro environment?
The failure of the 20th largest USA bank, which trades globally and has a significant presence in the UK trading under SVB UK, is concerning. Many wonder if this will carry over into many other institutions that hold low-interest bonds; in the UK, we have already seen pension funds caught on the wrong side of the central banks’ rapid interest rate hikes.
Many saw this coming and predicted more pain. When a central bank rate hikes, it is customary to raise rates slowly over time; this is called the adjustment period, where institutions can get their balance sheets in order, but with the speed of increases, many institutions, such as the SVB bank who hold bonds bought in low-interest rate times now find their bonds nearly worthless. Risk Management implemented at the bank needs to be more suitable for the environment it now trades in. The bank states that the bonds were due to be held to maturity and had no intention to sell; all good until the depositor wants their money back, and the bank is forced to sell them at a loss.
In my view, the bank’s outlook on the economy has been favourable, predicting that rates would come back down and make the balance sheet whole rather than hedging the risk. Hedging protects investments but reduces profit made. It appears that the management team at SVB had a gambling mindset, as in the past bank managers are gambling with customers’ money and lives. Could this spill over into other banks? Well, how well are they hedged? Suppose it turns out that other banks have this wrong. In that case, the central bank can’t afford to bail out everyone, and I see only one solution, zero or negative interest rates immediately with the possibility of causing another spike in inflation. But no one knows for definite how all this would pan out. These are my thoughts from someone uneducated in the world of the impossible puzzle of economics, but I like to throw my two cents out there and would love to hear your thoughts.
The USA has now decided to make all depositors whole on deposits regardless of the limit. Every bank in the USA has protection for accounts up to $250,000, with all depositors made aware of this constantly by the bank and government. I don’t understand the need to scrap and bypass this limit as it doesn’t hold anyone, the depositor or the bank, responsible for their actions and allows more risk to be taken, knowing that no matter what, they will get bailed out.
In the UK, accounts are protected to £85,00 through Financial Compensation Scheme (FSCS), and I wouldn’t advise holding more than that in one account. The UK and other countries may not be as forgiving.
A Quick Day Trade
I will occasionally participate in a day trade. These day trades are in the US markets, where I find volatility more favourable; a day trader needs volatility. Coinbase caught my attention this week; I wouldn’t say I like the company, the financials, or the sector it trades in, but as a day trader, this does not matter; we look at the chart and volume. I like trading companies such as Coinbase with two external factors moving the price, in this instance, the indices and the crypto prices; I watched the Nasdaq Tech 100 and Bitcoin. When both moved up with strength in the same direction, I witnessed pressure on the Coinbase stock to push the price higher and was able to extract profits with the trade successfully. Discipline and risk management are still essential, even more so in day trading with the speed of price moves playing with emotions and catching traders out.
To learn more about day trades, inquire about the courses that will be available soon.
UK Short-term Swing Trades
Again, this week nothing has caught my eye. The market has no direction, with most investors fearing we have seen signs of another 2008 banking crisis; the best thing to do is sit out, wait, and have yet another cup of tea. That is what swing trading is about, sitting on your hands, patiently waiting. Soon we will start another run on the upside, and I look forward to writing about those companies I am trading.
MY UK longer-term Watchlist
I have some profitable and growing UK companies that I would like to buy or add to on cheaper valuations. These would be core or position trades which are pushed down by the market; they would be held longer than my average momentum swing trades, but whether these companies will make it to my buy prices is anyone’s guess. If not, I will use the capital set aside to ride any momentum to the high side.
The following are examples of companies I am looking to buy. I am looking at well-run, low-debt, profitable and growing companies that are pushed down by current market conditions and should bounce back quickly but also offer some protection in a bear market.
It is a smaller house builder that holds its own very well among the big boys. The business offers lower-cost housing, with an average cost of around £170k. The company is going through a restructuring, with 15% of roles disbanded and some merged, saving around £4m a year. With a strong balance sheet and trading under its Net Tangible Asset Value (NTAV), the company should handle a downturn in the sector well. I have a small position with the hope of topping up for 350 -320p (based on technical analysis). EPS is expected to slow over the next year to 41p, down from 60p in FY22 but expected to pick up in Full Year 24 and FY25. I will watch the housing market and factor this into my positioning. I do have a positive outlook after the short-term noise.
I like both DIY stores and use them both regularly. In the UK, you will know these as B&Q and Selco. Both businesses are bustling every time I enter, and the macro environment we find ourselves in does not affect customer spending on their homes and projects. Most people I know are discussing projects they have planned for summer and have no intention of tightening the purse strings anytime soon. Last year’s outlook seemed more doubtful of escaping a hard-landing recession; now those clouds are parting in the recession discussions, and could be some pent-up demand.
Associated British Foods plc is a worldwide, diversified food, ingredients, and retail company. It operates through five segments: Grocery, Sugar, Agriculture, Ingredients, and Retail.
Associated British Foods is again an example of watching and researching companies I have experience using. My wife, her friends, and her family love Primark, one of the many brands trading under ABF. Times have changed, gone are the days one would not be seen dead without a label displayed on their bust advertising the fact you paid two weeks’ wages for your jumper. I was once that person. Shopping at Primark no longer seems to be related to the likes of Vicky Pollard, and many celebrate their purchase and announce the low prices paid. I recently watched, or rather it was on in the background, big lips, massive muscles, drunken holiday program on ITV, you know, the sort. I was shocked to hear the name Primark mentioned positively on more than one occasion. In these times where consumers are fastening their belts in the wake of a global depression, I think whilst some worry about declining sales, maybe the products on offer could attract new customers into the store looking for something cheaper. I recently purchased a tracksuit to wear about the house for £12; some years ago, it would have been a Nike tracksuit costing eight times that.
ABF celebrates the fact that it is diversified, and in the current economic headwinds, most investors celebrate that too.
The company makes its money through 5 different segments:
Grocery The manufacture of grocery products, including hot beverages, sugar & sweeteners, vegetable oils, balsamic vinegar, bread and Baked goods, cereals, ethnic foods, and meat products, which are sold to retail, wholesale, and food service businesses.
Sugar The growing and processing of sugar beet and sugar cane for sale to industrial users and the company’s own brand of Silver Spoon.
Agriculture The manufacture of animal feeds and the provision of other products and services for the agriculture sector.
Ingredients The manufacture of bakers’ yeast, bakery ingredients, enzymes, lipids, yeast extracts and cereal specialities.
Retail Buying and merchandising value clothing and accessories through Primark and Penney’s retail chains.
The price of ABF has been on a good run recently, with investors hoping we are due a recovery in the market. At the same time, other investors are happy to add ABF to a portfolio due to its diversified trading, which can offer some protection if the bear market continues. The company provides a 2.5% dividend yield. In current conditions, you can easily find a higher-paying dividend company; if dividend investing is your strategy, ABF offers more stability and safety through a bear market. I will be looking for a slight pullback before starting a position. With all this and the strong balance sheet, I’m happy to hold this through all market conditions.
Volex plc is a United Kingdom-based company which manufactures and supplies power products and cable assemblies in North America, Europe, and Asia. As the world pushes forward to what appears to be solely electric, I like the industries Volex operates in, such as electric vehicles, datacentres, cables for household items and medical services. Volex is highly respected within the industry having over 100 years of experience. The company adds to growth by selecting excellent acquisitions to position itself near the customer. Nat Rothschild heads Volex; I expect that name opens some doors. Since his takeover, Nat has turned the company around and owns 24.7%, so he is perfectly aligned with shareholders. He could push to take the company private if the price heads south too much.
The price has taken some punishment over the last year, with no bad news released.
As you can see from the chart, the company price was range bound for some time. Investors fear the EV and data centre industry could be heavily damaged in the coming downturn. From a longer-term view, these areas are the future to which Volex gives diverse exposure.
With the current fall from the range of banking fears, this company is now looking tempting for me to start a small position.
I was talking with a friend at the beginning of the week, I asked him about his thoughts on the collapse of the Silicon Valley Bank and the crisis over at Credit Suisse and whether he thought this could be the start of another banking crisis. I was surprised by his reply that he knew nothing about it. As with much of the public in the UK this week, he had been following the latest news on Gary Lineker’s tweets.
Is the media forcing this rubbish onto us, or does the public generally want to engage in this mind-numbing useless news feed and forget about the real issues that affect us and our economy? Have we had enough bad news concerning the macro environment?
The failure of the 20th largest USA bank, which trades globally and has a significant presence in the UK trading under SVB UK, is concerning. Many wonder if this will carry over into many other institutions that hold low-interest bonds; in the UK, we have already seen pension funds caught on the wrong side of the central banks’ rapid interest rate hikes.
Many saw this coming and predicted more pain. When a central bank rate hikes, it is customary to raise rates slowly over time; this is called the adjustment period, where institutions can get their balance sheets in order, but with the speed of increases, many institutions, such as the SVB bank who hold bonds bought in low-interest rate times now find their bonds nearly worthless. Risk Management implemented at the bank needs to be more suitable for the environment it now trades in. The bank states that the bonds were due to be held to maturity and had no intention to sell; all good until the depositor wants their money back, and the bank is forced to sell them at a loss.
In my view, the bank’s outlook on the economy has been favourable, predicting that rates would come back down and make the balance sheet whole rather than hedging the risk. Hedging protects investments but reduces profit made. It appears that the management team at SVB had a gambling mindset, as in the past bank managers are gambling with customers’ money and lives. Could this spill over into other banks? Well, how well are they hedged? Suppose it turns out that other banks have this wrong. In that case, the central bank can’t afford to bail out everyone, and I see only one solution, zero or negative interest rates immediately with the possibility of causing another spike in inflation. But no one knows for definite how all this would pan out. These are my thoughts from someone uneducated in the world of the impossible puzzle of economics, but I like to throw my two cents out there and would love to hear your thoughts.
The USA has now decided to make all depositors whole on deposits regardless of the limit. Every bank in the USA has protection for accounts up to $250,000, with all depositors made aware of this constantly by the bank and government. I don’t understand the need to scrap and bypass this limit as it doesn’t hold anyone, the depositor or the bank, responsible for their actions and allows more risk to be taken, knowing that no matter what, they will get bailed out.
In the UK, accounts are protected to £85,00 through Financial Compensation Scheme (FSCS), and I wouldn’t advise holding more than that in one account. The UK and other countries may not be as forgiving.
A Quick Day Trade
I will occasionally participate in a day trade. These day trades are in the US markets, where I find volatility more favourable; a day trader needs volatility. Coinbase caught my attention this week; I wouldn’t say I like the company, the financials, or the sector it trades in, but as a day trader, this does not matter; we look at the chart and volume. I like trading companies such as Coinbase with two external factors moving the price, in this instance, the indices and the crypto prices; I watched the Nasdaq Tech 100 and Bitcoin. When both moved up with strength in the same direction, I witnessed pressure on the Coinbase stock to push the price higher and was able to extract profits with the trade successfully. Discipline and risk management are still essential, even more so in day trading with the speed of price moves playing with emotions and catching traders out.
To learn more about day trades, inquire about the courses that will be available soon.
UK Short-term Swing Trades
Again, this week nothing has caught my eye. The market has no direction, with most investors fearing we have seen signs of another 2008 banking crisis; the best thing to do is sit out, wait, and have yet another cup of tea. That is what swing trading is about, sitting on your hands, patiently waiting. Soon we will start another run on the upside, and I look forward to writing about those companies I am trading.
MY UK longer-term Watchlist
I have some profitable and growing UK companies that I would like to buy or add to on cheaper valuations. These would be core or position trades which are pushed down by the market; they would be held longer than my average momentum swing trades, but whether these companies will make it to my buy prices is anyone’s guess. If not, I will use the capital set aside to ride any momentum to the high side.
The following are examples of companies I am looking to buy. I am looking at well-run, low-debt, profitable and growing companies that are pushed down by current market conditions and should bounce back quickly but also offer some protection in a bear market.
It is a smaller house builder that holds its own very well among the big boys. The business offers lower-cost housing, with an average cost of around £170k. The company is going through a restructuring, with 15% of roles disbanded and some merged, saving around £4m a year. With a strong balance sheet and trading under its Net Tangible Asset Value (NTAV), the company should handle a downturn in the sector well. I have a small position with the hope of topping up for 350 -320p (based on technical analysis). EPS is expected to slow over the next year to 41p, down from 60p in FY22 but expected to pick up in Full Year 24 and FY25. I will watch the housing market and factor this into my positioning. I do have a positive outlook after the short-term noise.
I like both DIY stores and use them both regularly. In the UK, you will know these as B&Q and Selco. Both businesses are bustling every time I enter, and the macro environment we find ourselves in does not affect customer spending on their homes and projects. Most people I know are discussing projects they have planned for summer and have no intention of tightening the purse strings anytime soon. Last year’s outlook seemed more doubtful of escaping a hard-landing recession; now those clouds are parting in the recession discussions, and could be some pent-up demand.
Associated British Foods plc is a worldwide, diversified food, ingredients, and retail company. It operates through five segments: Grocery, Sugar, Agriculture, Ingredients, and Retail.
Associated British Foods is again an example of watching and researching companies I have experience using. My wife, her friends, and her family love Primark, one of the many brands trading under ABF. Times have changed, gone are the days one would not be seen dead without a label displayed on their bust advertising the fact you paid two weeks’ wages for your jumper. I was once that person. Shopping at Primark no longer seems to be related to the likes of Vicky Pollard, and many celebrate their purchase and announce the low prices paid. I recently watched, or rather it was on in the background, big lips, massive muscles, drunken holiday program on ITV, you know, the sort. I was shocked to hear the name Primark mentioned positively on more than one occasion. In these times where consumers are fastening their belts in the wake of a global depression, I think whilst some worry about declining sales, maybe the products on offer could attract new customers into the store looking for something cheaper. I recently purchased a tracksuit to wear about the house for £12; some years ago, it would have been a Nike tracksuit costing eight times that.
ABF celebrates the fact that it is diversified, and in the current economic headwinds, most investors celebrate that too.
The company makes its money through 5 different segments:
Grocery The manufacture of grocery products, including hot beverages, sugar & sweeteners, vegetable oils, balsamic vinegar, bread and Baked goods, cereals, ethnic foods, and meat products, which are sold to retail, wholesale, and food service businesses.
Sugar The growing and processing of sugar beet and sugar cane for sale to industrial users and the company’s own brand of Silver Spoon.
Agriculture The manufacture of animal feeds and the provision of other products and services for the agriculture sector.
Ingredients The manufacture of bakers’ yeast, bakery ingredients, enzymes, lipids, yeast extracts and cereal specialities.
Retail Buying and merchandising value clothing and accessories through Primark and Penney’s retail chains.
The price of ABF has been on a good run recently, with investors hoping we are due a recovery in the market. At the same time, other investors are happy to add ABF to a portfolio due to its diversified trading, which can offer some protection if the bear market continues. The company provides a 2.5% dividend yield. In current conditions, you can easily find a higher-paying dividend company; if dividend investing is your strategy, ABF offers more stability and safety through a bear market. I will be looking for a slight pullback before starting a position. With all this and the strong balance sheet, I’m happy to hold this through all market conditions.
Volex plc is a United Kingdom-based company which manufactures and supplies power products and cable assemblies in North America, Europe, and Asia. As the world pushes forward to what appears to be solely electric, I like the industries Volex operates in, such as electric vehicles, datacentres, cables for household items and medical services. Volex is highly respected within the industry having over 100 years of experience. The company adds to growth by selecting excellent acquisitions to position itself near the customer. Nat Rothschild heads Volex; I expect that name opens some doors. Since his takeover, Nat has turned the company around and owns 24.7%, so he is perfectly aligned with shareholders. He could push to take the company private if the price heads south too much.
The price has taken some punishment over the last year, with no bad news released.
As you can see from the chart, the company price was range bound for some time. Investors fear the EV and data centre industry could be heavily damaged in the coming downturn. From a longer-term view, these areas are the future to which Volex gives diverse exposure.
With the current fall from the range of banking fears, this company is now looking tempting for me to start a small position.
